Where is the DJIA headed? June 29, 2009 forecast

This post only consists of the executive summary to my complete report. CLICK HERE or go to http://www.technicalanalysisbase.com/djia-weekly/june-29-2009-djia to access the complete report.



Unlike all my previous DJIA forecasts, this analysis is not intended to be a weekly forecast. The primary objective is to identify major inflection points. Following are the highlights of the report:

Major support at 7,449 and 7,193 (Chart 1 and Chart 3). Major inflection point (support level in this case) at 7,388-7,449 (Chart 4).


Major Resistance at 9,043 (Chart 2). Significant resistance level around 8,529 (triangle apex level identified in Chart 4).


SMA-15 > DJIA > SMA-200 > SMA-50 (Chart 3). SMA-50 crossover of SMA-200 will be bullish.


If the corrective wave was of the zigzag family, then the correction of the cycle degree is complete. DJIA then is in impulsive mode.


The recent rally was the first wave of intermediate degree. DJIA is now in wave 2.
A head and shoulders bottom appears to be forming. Therefore, wave 2 should signal the formation of the right shoulder. The maximum retracement will be till 7,388-7,449.


The only concerning observation is that the correction from June 11, 2009 onwards has reached the base of wave 4. The latest price action indicates the start of the next wave. The next wave will carry DJIA much higher if the correction was a zigzag. However, a flat correction should see DJIA consolidate and end lower in the intermediate term.


In case of a flat correction, the DJIA should reach from ~8,900-9,021 before making the 5 waves down of the 3-3-5 variation.


If the latest zigzag is not completed yet, then the minimum price objective is 7,958 (38.2% confluence zone identified in Chart 3).


Triangle apexes often signal major changes in trends. At the apex of the symmetrical triangle (apex 1 in Chart 10), the VIX began its descent from around 46 to 25. Apex 2 is the apex of an artificially drawn descending triangle.


The more traditional descending triangle apex (apex 3) occurs on July 13. July 13 is a Monday, the day which statistically results in the least returns.


Perhaps VIX will quietly touch ~23 (Descending Triangle completion level) by July 13 before violently rallying. A VIX rally has extremely bearish implications for the DJIA. Refer to Correlation during the Recent Market Downturn to see correlation details.



INFLECTION POINTS






ELLIOTT WAVE PRINCIPLE APPLIED

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